Australia's Active Trade Policy: Maintaining the Momentum

Introduction

The great American movie mogul, Samuel Goldwyn, once said: 'the harder I work, the luckier I get.'

He was talking about the movies, but he could have been talking about the Australian economy. We've always been a lucky country, with abundant natural resources. In the last ten years, we've made our luck go further by working hard to reform the economy.

As a result, Australia now has the eighth highest standard of living in the developed world. In 1995, we were number thirteen.

We have created 1.9 million new jobs in the last decade. As a result, the unemployment rate is now at its lowest level in a generation - 4.8 per cent. Real wages have increased substantially, by 16.8 per cent

Australia's 30,000 exporters have had a critical role in our economic success. In 2005-06, our exports totalled $192 billion, a new record. Fifteen of our top 20 exports reached record levels, including our exports of coal, iron ore, natural gas and passenger motor vehicles.

One in five Australian jobs depends on exports, with the number rising to one in four in regional areas.

We have to press on with increasing our exports, which means we have to keep making the tough decisions that are needed to increase Australia's productivity.

Our new workplace relations legislation, WorkChoices, is helping to make businesses more competitive by enabling employers and their workers to reach agreements that suit their own circumstances.

Since WorkChoices came into effect, Australian employers have created 159,000 new jobs. One of the reasons is that WorkChoices exempts small businesses from the Keating Government's unfair dismissals law. The law used to discourage small businesses from hiring new staff, because they knew they couldn't afford to defend an unfair dismissals case if he or she didn't work out.

Australia's trade policy approach

The Government is supporting our exporters with the most ambitious trade policy agenda in Australia's history.

We are seeking to free up world trade through the Doha Round of negotiations in the World Trade Organization.

We want to free up the trade in industrial goods, services and most importantly in agriculture, the most distorted sector of world trade. On average, agricultural tariffs are more than three times higher than tariffs on non-agricultural goods. What's more, the prices our exporters receive are depressed by the farm support programmes run by many developed countries.

Primary producers in the United States receive 16 per cent of their income from government support. In the European Union, they receive 33 per cent.

An ambitious outcome to the Round could increase the value of our major agricultural exports by 15 per cent in 2011, compared to their value if the existing trade barriers continue. It could also lift 32 million people in the developing world out of poverty.

The negotiations on the Round are suspended at the moment because the discussions on agriculture broke down.

My goal over the coming months will be to encourage the major players to get back to the negotiating table.

Later this month, I'll be chairing a meeting of the Cairns Group - 18 agricultural exporting countries that account for more than a quarter of the world's agricultural trade. It will be an important early opportunity to discuss how to revive the negotiations with the head of the WTO, Pascal Lamy, the US Trade Representative, Susan Schwab, and the US Agriculture Secretary, Mike Johanns.

The Cairns Group is itself a remarkable achievement for Australia's trade diplomacy. This meeting will celebrate the 20th anniversary of the group's founding during the Uruguay Round.

Bilateral and regional free trade agreements

In addition to our multilateral trade efforts, Australia is also looking for trade results through bilateral and regional agreements.

These can often get faster commercial results than the multilateral process. They can also address non-tariff barriers like government procurement, competition, intellectual property and investment controls.

Australia has successfully negotiated FTAs with Singapore, the United States and Thailand. We also have our closer economic relationship (CER) agreement with New Zealand.

When the US free trade agreement came into effect, two-thirds of America's tariffs on our agricultural products immediately fell to zero.

Our lamb exports to the US increased by 19 per cent in 2005. Our dairy exports are continuing to expand, with cheese exports increasing by 103 per cent.

The FTA has also boosted our services exports to the United States. One successful exporter is Vigil Systems, a Brisbane based technology company. The Los Angeles metro is now using its intelligent transport system product to recruit, train, monitor, and manage its professional drivers and vehicle monitors.

Vigil was able to sell its system to Los Angeles because of the government procurement clauses in the FTA, which give Australian firms better access to the US Government and 31 state governments.

Meanwhile, our FTA with Thailand has delivered benefits across the board. Last year, our exports to Thailand increased by 35 per cent. Most of the tariffs faced by our fruit and vegetable exporters will be phased down to zero over the next four years. The tariffs on steel and copper products were immediately halved or eliminated altogether.

Our free trade agreement with Singapore has delivered considerable gains for exporters of services such as education. In 2005, our services exports to Singapore increased by 11.6 per cent.

Australia's current FTA negotiations

We are currently negotiating FTAs with Malaysia, the ASEAN countries in conjunction with New Zealand, and of course with China.

China's rapid development is one of the most important events of our time:

• It is already the world's third largest trading nation after the United States and Germany.

• Economic growth in China has averaged 9½ per cent over the past two decades and has been the single largest contributor to global growth over the past five years.

• In 2005 China alone accounted for around one quarter of world economic growth.

• China now consumes 25 per cent of the world's base metals, and well over 30 per cent of iron ore and coal supplies.

• Last year, Chinese enterprises produced 50 per cent of the world's digital cameras, 37 per cent of its computer hard drives and around 25 per cent of its major kitchen appliances.

• ABARE forecasts China's share of world trade will rise to 16 per cent by 2015, up from just 1 per cent in 1988 and 6 per cent in 2004.

Our negotiators are in China right now, carrying out market access negotiations on goods and agriculture.

We are seeking commitments from China to remove its tariff and non-tariff barriers on Australian exports, including addressing its tariff rate quotas on our exports of wool, wheat, cotton, rice and sugar.

We have told China that negotiations on services and investment market access must start before the end of 2006.

China has agreed that the FTA will need to include investment and government procurement. Both areas are of significant commercial importance to Australia but very sensitive for China.

The negotiations have a long way to go and will be difficult. We will take as long as we need to achieve a commercially valuable outcome for Australian industry.

Any agreement will need to be comprehensive. It will need to be completed as a single package, and will need to maintain the integrity of our manufacturing industry plans.

We are carrying out a feasibility study into a possible FTA with Japan, and doing an analysis of the implications of an FTA with the Gulf
Co-operation Council, which consists of the United Arab Emirates Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.

Supporting our exporters through Austrade

The Government is not only expanding market access for Australian businesses. Through Austrade, we are identifying specific export opportunities and are helping companies win deals.

Austrade has a global network covering more than 140 locations in over 60 countries as well as throughout Australia. Preliminary figures show it helped over 5,000 companies achieve export deals worth over $18 billion in the last 12 months.

To take advantage of opportunities in China, we have expanded our China network with four new regional offices, giving us a presence in 15 locations and what we call trade correspondents in 12 more places. In total, we now have 100 staff in China. In 2005-06, Austrade helped over 650 Australian businesses conclude deals in China, including over 200 new exporters.

To take advantage of the FTA with the United States, we have appointed 30 new Austrade export facilitators - 23 in the US and 7 in Australia. We're now represented in 18 American cities.

Conclusion

So to summarise:

• We have made the Australian economy much more efficient and competitive.

• We are continuing our push into the markets of the world through our central role in the G6 group of the World Trade Organization and through our targeted approach in bilateral negotiations.
  

• The Austrade network is on the front line, assisting our exporters across the world.

• We are doing the hard work and making the tough decisions that are needed to keep our economy strong.